BARRON'S COVER STORY: Speaking of Bubbles by Lauren R. Rublin
Summary: Barron's roundtables twelve highly-respected Wall Street analysts. "Goldilocks has imbibed a bit too much liquidity," one says. Excess money, and the bubbles it creates, could lead to markets overheating and keeling over. But most don't think the party's going to end this year; they see stocks up 8-10%, bonds flat, and a struggling dollar. This week's installment, the first of three, features the stock picks of low-P/E hunter Scott Black and Pequot Capital captain Art Samberg:
- Black's Picks: (1) Apache Corp. (APA) -- oil reserves have grown for 21 consecutive years... the company is a powerhouse, it's cheap, and will likely be discovered by private-equity buyers. (2) Bronco Drilling Company Inc. (BRNC) -- conservative estimates give it a 4.3 P/E ratio. At $17/share, it is in the bargain basement. (3) Home Solutions of America Inc. (HSOA) -- wrongly perceived as a hurricane-only business, it has an extensive business backlog, and a 7.4 multiple. (4) Altra Holdings Inc. (AIMC) -- the heavy manufacturer has the #1-2 market share in 50%+ of its products. Its multiple is 11.3, and could go to 15, taking the $13.50 IPO to $18-19. (5) Arrow Electronics Inc. (ARW) -- one of the most reasonable tech stocks. On the heels of recent successful acquisitions, it's going for 9.6x earnings. (6) Severn Bancorp Inc (SVBI) -- the small banker has off-the-charts loan growth and interest margins.
- Samberg's Picks: (1) Monsanto Company (MON) -- Ethanol is huge, its progress on drought-resistant corn is stunning, and they've developed a trans-fats-free soy seed. (2) Companhia Vale do Rio Doce (RIO) -- no one has bothered to factor in the accretive earnings from its Inco acquisition. (3) Apollo Group Inc. (APOL), Career Education Corp. (CECO) and Corinthian Colleges Inc. (COCO) -- for-profit education stocks have bottomed. Apollo is the value pick of the lot, with a new CEO coming in and full accreditation expected by December. (4) Baidu.com Inc. (BIDU) -- its 64x multiple is 'obscene,' but with 170% growth, a great new search algorithm, and still low penetration, growth will accelerate.